SDCERS AND THE DISAPPEARING SURVIVOR BENEFIT
Do not assume that a Domestic Relations Order can award an SDCERS survivor benefit
Most people think of government benefits as “better” than the employee benefits received from private employers. However, there are traps for the unwary when dividing government retirement benefits in divorce. Government retirement benefits such as benefits earned with the City of San Diego, County of San Diego, and State of California are not governed by ERISA.
Therefore, the rules and regulations that pertain to government benefits are not necessarily consistent with ERISA, or consistent with common sense. The rules governing the division of government benefits are established by government code and the government’s interpretation of their own code – which can change from year to year.
San Diego City Employees’ Retirement System (SDCERS) is governed by a 13 member Board of Administration and it is possible for a new Board to make the decision to interpret the San Diego Municipal Code differently than its predecessor Board.
In 2008, the SDCERS Board passed Board Rule 5.20 which eliminates the ability of a former spouse to receive the 50 percent Surviving Spouse Continuance unless the employee retired and a Domestic Relations Order was served on SDCERS prior to September 19, 2008.
In other words, even if both parties agree to give the former spouse a survivor benefit, SDCERS will not permit a current Domestic Relations Order to award the 50 percent survivor benefit continuance to the non-employee former spouse. This benefit simply disappears.
Board Rule 5.20 subpart (e) states: “The Former Spouse of a Member is not eligible for a Surviving Spouse Continuance if the Member retired or entered DROP on or after September 19, 2008.”
Although the language of the Rule is relatively simple to read, it is nevertheless difficult to conceptualize because of the following fact pattern: the parties marry, Husband retired while married, Wife was eligible for the 50 percent Surviving Spouse Continuance while married, and then the parties divorce in 2009.
The mere fact that the parties divorce after September 19, 2008, eliminates all entitlement to the continuance benefit. Wife would have received 50 percent of the monthly benefit after Husband’s death if they had stayed married, but instead Wife will receive zero dollars upon Husband’s death.
The SDCERS Board Rule has in essence divested Wife of this benefit simply because the divorce occurred.
SDCERS’ Board Rule 5.20 is Inconsistent with Carmona
Many family law attorneys are familiar with the Ninth Circuit case Carmona v. Carmona which held that a QDRO entered after retirement cannot eliminate the surviving spouse benefit that was elected at retirement.
The Court explained: “Because the retirement of a plan participant ordinarily crates a vested interest in the surviving spouse at the time of the participant’s retirement, we conclude that a DRO issued after the participant’s retirement may not alter or assign the surviving spouse’s interest to a subsequent spouse.”
Carmona guarantees the benefits elected at retirement for the surviving spouse, which is in direct conflict with the Board Rule 5.20 which eliminates the Surviving Spouse Continuance upon divorce.
The only way to explain the difference in logic between these two results is the plan in Carmona was a private plan governed by ERISA while SDCERS is a government plan governed by Code and open to Board interpretation.
Suggestion When Parties Have SDCERS Benefits
This article addresses the availability of the SDCERS Surviving Spouse Continuance upon divorce. There may be other benefits available to the Former Spouse depending the facts of each case such as whether the employee elected an Optional Settlement rather than relying only on the Surviving Spouse Continuance and whether the employee is retired.
One suggestion to parties who have SDCERS benefits or to family law attorneys assisting clients with dividing SDCERS benefits in divorce, is to have the Domestic Relations Order for SDCERS prepared and approved by SDCERS before a Marital Settlement Agreement is signed or before trial on this issue.
Furthermore, because the act of retiring is trigger event that sets limitations on survivor benefits, another suggestion is to wait until after the Domestic Relations Order is served before the employee retires. If retirement must occur before the Domestic Relations Order is filed, both parties should consider coming to an agreement in writing as to what election should be made by the employee at retirement.